If you’re looking for additional capital from outside investors, the better you can position your business to their needs and what they’re looking for, the better your chance of success.
It's important to remember that different types of investors usually have different goals.
They may be happy with a better return on their investment than they’d get if they’d kept their money in a savings account. Possibly seeing you do well is the key outcome.
These are wealthy individuals who provide capital in exchange for a higher interest rate or some ownership equity, or a mix of both.
These are professional fund companies that will almost always take a percentage of your business in exchange for the cash.
The UK Angel Investment Network has a section on Funding for Small Businesses that provides an overview of angel investors and venture capitalists.
This allows you to profile your business and attract investment (or loans) from a range of different people who wouldn’t normally be eligible to invest in new businesses without a prospectus. LendingCrowd’s website on Crowdfunding Scotland is a great place to start.
Regardless of who invests, there are some things you can do to ‘prepare’ your business to make it look more attractive to an investor, and to increase the value.
Investors like to know that their money is being put to work to increase profits, not to pay off debt. Similarly, they’re not going to be keen on investing in a business that doesn’t have proper accounting processes in place.
To make your financials look better you should look at;
At the end of the day your financials might look great, the product or service might seem revolutionary and the industry might appear the next best thing to a gold mine, but it all fails if you don’t have a great management team to implement the business. Investors want to see a well-knitted team that is committed and enjoys what they do. If you don’t have the right person for a key role, then explain you will get them once the funding is raised.
The second challenge is that managing a business with 10 employees is different from 100 employees (if your growth plans work). Cover the restructuring of management to cope with growth in your proposal and show how you will deal with this challenge and with your own evolving role in the company.
A clear strategic plan outlining where do you see your business in five and ten years time. Investors want to see your long-term thoughts, even if these are only educated guesses. A strategic plan is a test of your vision and your ability to plan ahead. It should include:
Although it’s important to remain realistic, it’s still essential to promote the positive aspects of your business, those that would appeal to potential investors. Keep the following in mind:
As much as you can, establish a good rapport with them. After all, you’re going to be in business together, so it’s important to get along with each other. Make sure they know you’ve got an open mind when it comes to their advice – a good investor will have lots to offer in the way of experience and contacts.
Yes, developing an exit strategy before you’ve even got investment needs to be covered; the investors then know you are thinking about the end goal. The most common exits are:
Attracting investors is down to presenting your business in the best possible light, while still remaining realistic. Investors won’t be interesting in financing a business that’s in trouble, so they’re not a good option if your main goal is to solve financial difficulties. Investors are interested in businesses that will pay off for them down the line, so your main priority is showing them how your business will achieve that.
POSTED IN: Finance advice,2017